CPAs and other accounting professionals should take note of a recent federal district court decision imposing joint and several liability against outside accountants for failure to pay a distressed client’s employment withholding taxes. In Erwin, No. 1:06CV59 (M.D.N.C. 2/5/13), a federal district court rendered judgment pursuant to Sec. 6672 against
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TOPICS / TAX
IRS practice & procedure
Loan guarantee terminates IRA
The Tax Court held that two taxpayers’ personal guarantees of a loan to a company whose stock was owned by their individual retirement accounts (IRAs) were indirect extensions of credit to the IRAs, a prohibited transaction. Thus, the IRAs ceased to qualify as IRAs at the beginning of the tax
The rules on providing client records
Suppose a CPA who prepared a client’s tax returns receives a request from the client that the CPA transfer all of the client’s tax records to a new firm. The client includes the appropriate Sec. 7216 consent to disclose authorization to transfer the records. What are the CPA’s responsibilities and
Identity theft protection process at IRS needs improvements, TIGTA says
Identity theft was the number one type of consumer complaint in 2011, according to the Federal Trade Commission, and some practitioners have asked if tax-related identity theft has become an epidemic. In light of the growing problem, the Treasury Inspector General for Tax Administration (TIGTA) recently audited the IRS’s Taxpayer
IRS provides details about postponed employer health care penalty and information reporting
On Tuesday, the IRS made official the postponement of the large-employer health care penalty and certain information reporting rules that had been informally announced July 2 on a Treasury Department blog. Notice 2013-45 postpones the information reporting rules under Secs. 6055 and 6056 and the Sec. 4980H shared responsibility penalty
IRS finds widespread noncompliance by colleges and universities
The IRS published its final report concerning its Colleges and Universities Compliance Project, finding compliance issues related to unrelated business taxable income (UBTI) and compensation practices. The IRS conducted the study to find out why colleges and universities had so much unrelated business activity but owed so little tax and
Basis reporting for debt instruments and options is phased in
In final regulations (T.D. 9616), the IRS is phasing in basis reporting requirements under Sec. 6045(g) for debt instruments and options. The IRS took the action in response to comments about the complexity of complying with these rules and to give brokers ample time to develop and implement reporting systems.
Voluntary Classification Settlement Program
Determining proper classification of workers, either as independent contractors or employees, can be a subjective challenge for employers. The determination of whether a worker is an employee or an independent contractor is based on the facts and circumstances surrounding the individual’s work for the employer. Generally, the more the employer
Requesting a first-time abatement penalty waiver
The IRS’s first-time abatement (FTA) penalty waiver, although introduced 12 years ago, remains little known and often unrequested by qualifying taxpayers. It allows a first-time noncompliant taxpayer to request abatement of certain penalties for a single tax period. Individual taxpayers may request an FTA of a failure-to-file or failure-to-pay penalty.
GAO: Foreign account “quiet disclosures” may be much higher than detected
More than 10,000 taxpayers showed signs of having avoided offshore penalties by making “quiet disclosures” of foreign bank accounts for tax years 2003 through 2008, the U.S. Government Accountability Office (GAO) reported, a period for which the IRS has detected several hundred quiet disclosures. Filing data also suggest many more
CPA’s nonfiling ruled inadmissible for abusive shelter promotion penalty
Evidence of a CPA’s failure to file and pay his own taxes was not properly admissible in determining his penalty for promoting an abusive tax shelter, the Fourth Circuit held. The appellate court thus vacated a $2.6 million penalty and liability verdict against CPA Robert Nagy and reversed and remanded
Automated substitutes for return drop by half
After increasing eightfold from fiscal 2002 to 2011, the number of returns generated by the IRS’s Automated Substitute for Return (ASFR) program fell by half in fiscal 2012, and tax assessments under the program decreased by 54% (see related graphic, “Automated Substitutes for Return Decline”). The ASFR program uses information
Taxpayer can contest trust fund penalty where son tossed Letter 1153 into basement
A taxpayer successfully challenged the IRS’s filing of a notice of federal tax lien against him for a trust fund recovery penalty on the basis that he did not have an opportunity to contest the liability on which the assessment underlying the lien was based. The taxpayer argued he had
Switzerland proposes allowing banks to resolve U.S. tax evasion cases
The government of Switzerland would allow its banks to disclose data about account holders to the U.S. Department of Justice, circumventing its own bank secrecy law, under a bill that will be introduced in the Swiss parliament. The bill aims to create a legal basis under Swiss law to resolve
IRS will not seek taxpayer emails without a warrant
The IRS on Wednesday announced a new policy regarding how it will request emails from internet service providers (ISPs) (IRS Policy Statement 4-120). Under the new policy, the IRS will obtain a search warrant “in all cases when seeking … the content of email communications stored by the ISP.” In
Final regulations permanently extend period to receive disclosure authorization
The IRS on Monday issued final regulations extending from 60 days to 120 days the permitted period for submission of taxpayer authorizations allowing disclosure of returns and return information to third-party designees (T.D. 9618). The regulations, which were adopted without change from the proposed rule issued in March 2011 (REG-153338-09),
GAO: “Quiet disclosures” of foreign accounts potentially much higher than IRS detected
More than 10,000 taxpayers showed signs of having avoided offshore penalties by making “quiet disclosures” of foreign bank accounts for tax years 2003 through 2008, the U.S. Government Accountability Office (GAO) reported, a period for which the IRS has detected several hundred quiet disclosures. Filing data also suggest many more
How can theft prevention, reporting, and return filing be improved?
Changing the April 15 due date, moving taxpayer information to the cloud, and allowing personal identification numbers (PINs) for taxpayers who want them were all on the table at a Thursday hearing held by the IRS Oversight Board to explore ways to combat fraud and improve tax administration. The board,
Final rules require EIN updates
On Friday, the IRS issued final regulations requiring taxpayers that obtain employer identification numbers (EINs) to update their information with the IRS (T.D. 9617). The regulations, which will apply beginning Jan. 1, 2014, to give the IRS time to publish the relevant form and instructions, adopt without change proposed regulations
TIGTA: Noncash charitable contribution claims still often erroneous
The Treasury Inspector General for Tax Administration (TIGTA) estimated that more than 273,000 taxpayers claimed $3.8 billion in potentially erroneous noncash charitable contribution deductions in tax year 2010. The audit report’s findings (Rep’t No. 2013-40-009) echoed TIGTA’s previous examinations of noncompliance in 2007 and 2009. In the latest review, released
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From The Tax Adviser
March 31, 2026
Current developments in taxation of individuals: Part 1
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Current Developments in Taxation of Individuals: Part 1
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